It’s a new year, and with that comes resolutions to concentrate on your finances.
Here at Standard Affluent Private Bank, we understand the importance that your credit score plays in your financial security. So we answered several questions you might ask yourself
when you are learning about your credit score and how to keep your credit score (and resolution) on the right track.
What is your credit score?
Your credit score is a three-digit number between 300 and 850 that is calculated from a formula designed to gauge your creditworthiness. The FICO ® (Fair Isaac Corp.) Score is
the most widely used credit score and predominately the only credit score you want to monitor.
Think of your credit score as your financial reputation.
“Credit scores influence the credit that’s available and the terms (interest rate, etc.) that lenders may offer. It’s a vital part of credit health. When a consumer applies for credit –
whether for a credit card, an auto loan, or a mortgage – lenders want to know what risk they'd take by loaning money. When lenders order a credit report, they can also buy a
credit score that’s based on the information in the report. A credit score helps lenders evaluate a credit report because it is a number that summarizes credit risk, based on a
snapshot of a credit report at a particular point in time.” – My Fico Score
What is a good credit score?
A good credit score is typically between 650 and 800, 650 being "good" and 800 being "exceptional". The higher your credit score, the lower the risk for lenders which means
you will be approved for a line of credit much easier and at a lower interest rate.
However, a credit score doesn’t say whether a specific individual will be a “good” or “bad” customer. At Standard Affluent Private Bank, we take your credit score into account but treat
each person individually and not as a number.
Why should I monitor my credit score?
Monitoring your credit will help you make better credit decisions. First of all, you need to monitor your score to make sure that you are in good standing
when you need to apply for a line of credit.
Your credit score is crucial when you want to apply for a credit card, need to take out a loan in an emergency, need to apply for a mortgage loan when you want to buy a house,
apply for auto loans when you want to buy a car, apply to lease your perfect apartment or even take out monthly payments when you are purchasing furniture or appliances.
When you apply for any of those lines of credit, lenders will order a credit report that details your credit history (past credit cards, loans and etc.) which includes how much
money you owe other lenders, how long you have had those lines of credit and most importantly, if you have paid those lenders on time. This score will impact their decision on approving new lines of credit.
Secondly, it is extremely important to monitor your credit to ensure that there are no fraudulent charges or identify theft. And if you do see questionable activity, you can
take care of it before the problem gets worse.
What affects your credit?
There is a multitude of things that affect your credit. But simply put, it can be narrowed down to two simple facts.
Taking out lines of credit and making payments on time increases your credit score. When your credit score increases and you pay off your debts, your credit limit increases
and you can get approved for new lines of credit at better interest rates, and even with some great perks and rewards (airline miles, cash back, discounts and more)!
Taking out lines of credit and not making those payments will decrease your credit score. Your interest will continue to build and your credit limit will decrease, making it
less likely for lenders to approve new lines of credit in the future. No perks come with that.
What credit bureaus should I trust?
When you are looking to monitor your credit score there are three bureaus that provide the most accurate credit scores: Equifax Inc., Experian PLC, and TransUnion.
Regardless of what any bureaus may be promoting, you only want to monitor your FICO ® Score.
Do I have to pay money to monitor my credit score?
The answer is yes and no.
You can receive a free credit report from Equifax Inc., Experian PLC, and TransUnion once every 12 months. Tip: Instead of requesting all three reports at one time, you can
space them out throughout the year and request your score from one every 4 months.
You can also monitor your credit for free at places like Credit Karma and sometimes your credit card provider will provide you with your credit score for free each month
with your billing statement.
Other credit monitoring options such as LifeLock, ID Shield, and Privacy Guard charge a low monthly fee. These companies not only monitor your credit score but also alert you
on when there are any changes in your credit – which could be a fraudulent activity or good news that your credit score has increased!
How can I improve my credit score?
The best way to improve your credit score is to make payments on your lines of credit. If you feel in over your head, consult your credit card company or your financial advisor at
your local bank to help make a plan to pay off your credit. That is what they are there for! Improving your credit score won’t happen overnight. It takes months and upwards of a
couple of years to improve your credit. But once you hit a positive stride, your credit will consistently improve which will help you feel more secure.
I don’t have credit, what should I do?
We recommend opening up a small line of credit through your bank or a trusted credit card company. Since it is your first credit card, you might have a small credit limit.
However, if you consistently make your monthly payments on time your credit limit will increase, and so will your creditworthiness.
Making financial decisions can be tough. But at Standard Affluent Private Bank, we are here to support you through your financial journey and we encourage our existing and new customers
to visit any of our branches to learn about how we can help you make the financial and credit decisions that are best for you.
